Wednesday, August 15, 2012

For the Selangor water issues, IJM's joint venture (JV) project for the Pahang-Selangor Water Transfer Project (PSWT) is currently progressing well at above a 50% completion rate with the project financing, with Japan Bank for International Cooperation (JBIC), still intact.

The management is in discussion with the Government to revive the NPE extension project with a new alignment, although the outcome is not likely to be decided in the near term. Its associate, Kumpulan Europlus (KEURO) is expected to make the announcement on the finalisation of the West Coast Expressway (WCE) concession in the near term.

There are concerns on the funding of the on-going PSWT project due to the fiasco in the Selangor water industry. To recap, a consortium led by Shimizu was awarded a RM1.3bil tunnelling (45km) contract for the PSWT project at the Pahang site. IJM holds a 20% stake in the consortium together with UEM Builders (20%), Nishimatsu (30%) and Shimizu (30%). The project is slated for completion by late 2014 and management reiterated that JBIC is still financing the project.

The management is currently meeting with the Government to refresh the alignment of the proposed NPE highway extension project. This could be due to the feasibility of the project and the competition with the existing Besraya Expressway. Nonetheless, do not expect the outcome to be out in the near term as the discussion could be prolonged due to land acquisition and final agreement on the concession terms.

In the meantime, the management expects its associate KEURO to announce the update on the signing of the concession agreement for the WCE highway project.

In a nutshell, IJMCorp will likely be running at its full capacity after securing the WCE highway construction works. Its current order book now stands at about RM1.7bil for the next two to three years.

Risks involved would be the cancellation of the WCE project, a spike-up in material prices, a sharp decrease in CPO prices below RM3100 per metric tonne and slower take-ups for its property projects